Aramco’s bumper profits may deepen pain for oil-importing economies

Saudi oil giant Saudi Aramco posted a better-than-expected $32.5 billion profit for the first quarter, underscoring how soaring crude prices and supply disruptions in the Strait of Hormuz are benefiting major exporters even as oil-importing economies brace for rising inflation, widening trade deficits and mounting pressure on foreign exchange reserves.

The world’s biggest oil exporter said net profit rose 25 per cent in the three months ended March 31, beating analyst expectations of $30.95 billion. Revenue climbed nearly 7 per cent year-on-year to $115.49 billion, helped by higher oil prices and stronger sales volumes across crude, refining and chemicals.

The results come as the US-Iran conflict continues to disrupt shipping through the Strait of Hormuz — a critical artery that previously carried roughly a fifth of global oil supply — pushing Brent crude back above $104 a barrel and reigniting fears of a broader global energy shock.

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For oil-importing economies, the surge in prices is becoming increasingly painful.

In India, the world’s third-largest crude importer, Prime Minister Narendra Modi on Sunday urged citizens to conserve fuel, reduce non-essential imports and avoid overseas travel as rising energy prices put pressure on the country’s foreign exchange reserves.

Modi called for a return to work-from-home practices and online meetings to cut fuel consumption, while also encouraging greater use of public transport and carpooling. He additionally urged people to reduce cooking oil use, avoid gold purchases and limit foreign travel for at least a year in a bid to preserve foreign exchange.

The remarks highlight growing concern among large importing nations that prolonged disruption in West Asia could worsen inflation and strain public finances if oil prices remain elevated.

Brent crude futures rose another 3 per cent on Monday after U.S. President Donald Trump rejected Iran’s response to a U.S.-drafted peace proposal, dimming hopes of a near-term reopening of the Strait of Hormuz. U.S. benchmark West Texas Intermediate crude also climbed above $98 a barrel.

Aramco said it had relied heavily on its East-West Pipeline to maintain exports amid the shipping disruption. The pipeline, which connects oil fields on Saudi Arabia’s Gulf coast to the Red Sea port of Yanbu, operated at its full capacity of 7 million barrels per day during the quarter.

“Our East-West Pipeline has proven itself to be a critical supply artery, helping to mitigate the impact of a global energy shock,” Aramco chief executive Amin Nasser said in a statement, adding that “reliable energy supply is critical”.

The pipeline can direct around 2 million barrels per day to refineries on Saudi Arabia’s west coast, leaving about 5 million barrels per day available for export through the Red Sea, bypassing Hormuz entirely.

Still, Saudi Arabia was forced to cut production by 2 million barrels per day after Iran’s blockade disrupted regional shipping. Aramco said heavier crude grades had been curtailed, while flows of its flagship Arab Light crude continued through alternative routes.

The company’s adjusted net profit reached $33.6 billion after excluding non-operational accounting items, also exceeding analyst forecasts.

Despite the strong earnings, Aramco’s free cash flow slipped to $18.6 billion from $19.2 billion a year earlier, partly due to a sharp rise in working capital. Its gearing ratio — a measure of debt relative to equity — rose to 4.8 per cent at the end of March from 3.8 per cent at the end of 2025.

Capital expenditure fell to $12.1 billion during the quarter from $13.4 billion in the previous quarter, although the company maintained its annual spending target of $50 billion to $55 billion.

Aramco also announced a first-quarter base dividend of $21.9 billion, up 3.5 per cent from a year earlier, reinforcing the company’s central role in financing Saudi Arabia’s economy. The Saudi government owns more than 81 per cent of Aramco, while the kingdom’s Public Investment Fund holds another 16 per cent stake.

The company’s earnings also illustrate a widening divide in the global economy: while oil exporters benefit from higher prices and constrained supply, import-dependent nations face rising costs for fuel, transport, fertilisers and industrial inputs.

Aramco’s chief executive warned that even if shipping flows through Hormuz resume soon, energy markets may take time to stabilise after losing roughly 1 billion barrels of oil supply over the past two months.

Shipping risks in the region also remain elevated. Kpler shipping data showed that at least two oil tankers exited the Strait of Hormuz last week with tracking systems switched off to reduce the risk of Iranian attacks, underscoring growing anxiety across global energy markets.